Markets trades in cheerful mood; metal stocks rally

Benchmark equity indices remain well entrenched in positive territory supported by strong auto sales for December 2010 and higher Asian stocks. While, the 30-share sensitive index (Sensex) of the Bombay Stock Exchange (BSE), was trading above crucial 20,600 level, the 50 - share S&P CNX Nifty of National Stock Exchange (NSE) was also trading above its psychological 6150 level. Except the BSE Information Technology index, all the other sectoral indices on BSE were in the green. Metal stocks rose across the board as LMEX, a gauge of six metals traded on the London Metal Exchange gained 1.17% on Friday, December 31, 2010. Realty and Consumer Durables stocks too are trading firm since morning. Index heavyweight Infosys edged lower in trade today. Broader markets were outperforming their larger counterparts, with Mid-Cap and Small-Cap indices gaining around 1.05% and 1.66%, respectively. The market breadth on the BSE was quite strong; there were 2102 shares on the gaining side against 694 shares on the losing side, while 84 shares were unchanged.

The BSE Sensex gained 98 points or 0.48% at 20,607.09. The index touched a high and a low of 20,664.80 and 20,566.93, respectively.

The BSE Mid-cap and Small-cap indices advanced 1.05% and 1.66%, respectively.

The main gainers in the BSE sectoral space were Metal up 1.95%, Realty up 1.33%, Consumer Durables (CD) up 0.86%, Bankex up 0.85% and Healthcare (HC) up 0.80%; while Information Technology (IT) down by 0.01% was the only loser in the BSE sectoral space.

Meanwhile, the Indian government is unlikely to extend a notification which brought down the import duty on sugar to zero percent as the domestic production outlook strengthens. The notification that was valid till Friday last week has been allowed to lapse which in effect has restored the 60% import duty on the sweetener.

The government had abolished that import duty on sugar in early 2009 to boost domestic supply as there was a shortfall in output in two consecutive years in 2008-09 and 2009-10. However, in the current season, the production is likely to revive again and reach around 24.5 million tonne against India's domestic consumption of 23 million tonne, thus leaving something for export. 

Over the last year, the country imported about 6 million tonne of sugar to meet domestic demand. Sugar production in the country, the second largest producer in the world, had declined to 14.7 million tonne in 2008-09. While it was expected that production will revive in 2009-10 season, a poor monsoon in 2009 severely impacted the crop and production remained below 20 million tonne and the country remained a net imported till recently. 

Now, however, the production outlook is clearer. After the late rains this season, it was apprehended by some analysts that production may go down compared with earlier estimates. The government however seems to be quite convinced of its production estimates. According to farm ministry officials, sugar production forecast remains at 24.5 million tonne as the recent rain might not adversely impact output. Also, the farm ministry expects that if there is some marginal downside in production, the same may be compensated by higher recovery.

The major gainers on the Sensex were Tata Steel up 2.97%, Jaiprakash Associates up 2.64%, Sterlite Inds up 2.38%, DLF up 2.04% and RCom up 1.93%.

On the flip side, Bajaj Auto down 2.58%, NTPC down 0.67%, HUL down 0.43%, Wipro down 0.28% and BHEL down 0.27% were the major losers on the index. 

India's exports continue to show strong growth amidst a mixed global atmosphere. In the month of November, shipments rose by 26.5% to $18.8 billion on year-on-year basis, raising hopes that the country would surpass the $200 export target by quite a margin. Last November the exports stood at $14.9 billion.

Imports on the other hand continue to show a weaker growth trajectory expanding at just 11.2% in November to $27.7 billion. While the poor import figures do raise some doubts on the growth momentum in domestic economy, it nonetheless has helped the country cut down its trade balance substantially over last few months. In November 2010, trade deficit stood at $8.9 billion.

Looking at the cumulative figures, over the April-November 2010 level, the exports totaled $140.2 billion compared to $110.6 billion in the year-ago period. The government now expects that India's merchandise exports would be around $210-215 billion in the current fiscal compared with a target of $200 billion set at the start of the fiscal 2010-11.

Total imports during the first eight months of this fiscal stood at $221.9 billion compared to $179 billion in the corresponding period last year. As a result, the trade deficit stood at $81.6 billion during the April-November period of this fiscal. Total trade deficit in the current fiscal is now expected to be around $120-$125 billion compared with expectation of over $140 billion of deficit a few months ago when the monthly trade deficit had reached over $12 billion.

One good thing in the trade data is that growth rate of oil imports is much lower and that of non-oil imports is much higher. Non-oil imports are generally taken as a good advance indicator of domestic growth momentum. Oil imports during November 2010 were valued at $7.7 billion, which was $2.3 higher than oil imports valued at $7.5 billion in the corresponding period last year. Cumulative growth in oil imports stand at 21.4% with total imports worth $64.8 billion. Non-oil imports on the other hand showed growth of 15.05% in Nov 2010 to $20.07 billion compared with $17.44 billion in the year-ago period. Cumulative growth in non-oil imports now stand at 25.04% at with total imports worth $157.11 billion.

The S&P CNX Nifty rose 31 points or 0.51% to 6165.50. The index touched a high and a low of 6178.55 and 6152.30, respectively. 

The top gainers on the Nifty were Tata Steel up 2.92%, Jaiprakash Associates up 2.69%, Sesa Goa up 2.60%, Sterlite Inds up 2.38% and SAIL up 2.16%.

The top losers on the index were Bajaj Auto down 2.60%, HCL Tech down 0.93%, NTPC down 0.62%, HUL down 0.61% and Wipro down 0.48%.

Other Asian markets were trading mostly in the positive terrain. Hang Seng surged 1.57%, Jakarta Composite advanced 0.74%, KLSE Composite climbed 1.05%, Straits Times soared 1.26%, Seoul Composite rose 0.93% and Taiwan Weighted gained 0.59%.

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